The board of MCX-SX would decide whether it would allow Financial Technologies to subscribe to its rights issue, MCX Vice Chairman Thomas Matthew said.
MCX-SX, India’s third national stock exchange run by MCX, is looking to raise Rs 500-600 crore via the rights issue, Matthew told CNBC-TV18.
Financial Technologies, the anchor investor of MCX, is under fire for Rs 5,500 crore payment default at its subsidiary National Spot Exchange.Also Read: Blackstone ups stake in MCX, buys shares worth Rs 81 cr
In the wake of the scandal, commodity derivatives regulator Forward Markets Commission has ordered FT to cut its stake in MCX while markets regulator Securities and Exchange Board of India has been reportedly mulling a similar decision with regards to MCX-SX.
The stock exchange is owned about 90 percent by public sector banks and financial institutions, Thomas, however, said.
Below is the verbatim transcript of Thomas Matthew's interview on CNBC-TV18
Q: In the continued effort to understand MCX and MCX-SX, can you enlighten us about how Financial Technologies (FT) warrants are likely to be treated? Do you have any clarity that they will have to sell it off to other parties and will not be able to exercise it as shares themselves?
A: The MCX-SX stock exchange is totally ring-fenced. The regulator has put public interest directors (PIDs) and there is a new board looking at the whole thing and so many steps are being taken to ensure the confidence of the public and the market, the confidence of traders and brokers and of our employees, all the stake holders are restored. For this, the board has started many initiatives and we are hopeful that in the coming days, MCX-SX will be able to show a good picture.
Q: Can you give us some clarity on whether MCX and FTIL are considered as common promoter entities or as independent entities?
A: The stake of MCX-SX mainly is held by the public sector banks. There are 16 public sector banks holding 66 percent of the total MCX-SX stake. There are also leading private banks and financial institutions holding stake in MCX-SX. The stake held by MCX and FTIL is only 5 percent each. That means 90 percent of the MCX-SX is held by the public sector banks and other leading private and public institutions.
Q: As of today, what is the net worth of MCX-SX because according to media reports, you are looking to raise anywhere between Rs 500 to Rs 1000 crore via rights issue. Your current equity is nearly Rs 55 crore. What premium are you expecting on the current equity to raise Rs 500-1000 crore going ahead in the market and until when can this process get completed?
A: Today, one of our major challenges is capital infusion for which the board has taken a call this month to go in for rights issue and on January 13 we are meeting our institutional shareholders for their concurrence about the rights issue and the process to be applied for that. Regarding the price, we will take a call when we meet and discuss with our institutional shareholders.
The net worth, because of the crisis has come down, but we are hopeful that we will be able to infuse sufficient capital through this rights issue which is one of the main things the board is following very closely.
We have other challenges in MCX-SX, for example today we want to restore the confidence of the market and all our stake holders for which we have been meeting our brokers, we have been meeting the institutional investors and the market in general. And we have another challenge of volumes going down.
I am very happy to say that because of various steps being taken, we have been able to arrest the fall in volumes and with good work being done by our people particularly the business development team, the membership team supported by all the other functional people, we will also increase and improve the volumes.
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Q: You are speaking about increasing the networth through the rights issue. What amount of money are you looking at through that issue and therefore, what kind of net worth are you looking at?
A: We will take the final call in discussion with our institutional shareholders which will take place on January 13. The board has in principle approved the rights issue to go ahead and what we are looking to raise is Rs 500-600 crore of capital through this rights issue which will see us through in the coming days.
Q: What could be the funding requirements for the next three years because will that 500-1,000 suffice the need of MCX-SX going ahead in the next three years or not and so, what amount are you allocating for next three-four years?
A: Our strategy is not only to infuse capital through the rights, we are at the same time making all efforts to see that volume and revenue improves. On the other side, we are making lots of efforts to cut down cost and to work within the least possible expenses. All these factors together, we are hopeful that MCX-SX will be able to show a good performance in coming days.
Q: What is your capital requirement for the next three years?
A: When I say we will have the rights issue and higher revenue in the coming days and coming months that would take care of our requirements for the coming years.
Q: Are you looking at launching any fresh products anytime soon?
A: That is a very important question. We have already finalised development of a new product and filing with a regulator. We got a good feedback from the market regarding this new product and are hopeful that this product will be welcomed and accepted well by the market.
Q: On the warrants conversion, will you allow FT and MCX to subscribe to rights issue since they are shareholders of the exchange?
A: That call will be taken by the board and our shareholders, whom we are meeting on (Jan) 13. Only after that we will be able to talk about this.
Q: Will Sebi have anything to say about this whether their stake will have to be brought down to 5 or whether they can keep at 10 percent i.e. 5 percent each, FT 5 percent and MCX 5 percent?
A: I would not like to comment on what Sebi has to say about that. As far as operations and functions of MCX-SX are concerned, Sebi as a regulator has been very supportive in all the efforts being made.
Q: What kind of new product are you looking at?
A: It is a product that we have developed and filed with the regulator. Let us see what all areas of that product will be accepted after which we will be able to make it public.
Q: Any update on the liquidity enhancement scheme (LES) and will you allow these public shareholders, who hold nearly 90 percent institutional shareholders to trade on MCX-SX to boost up the volume?
A: LES has been helping us for improvement of business. But then we had a close look at this LES as a whole and we felt it has to be remodeled, which our team has already done and the restructured remodeled LES has been accepted and will continue for sometime.
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